The impact of the 2012

Olympics on tourism in
London

Members:
Ting-Yu Tung S3028860
Roxana-Georgiana Apostu S3029204
Gemma Gaya Torras S3024040

Number of words with references: 4,141

Number of words without references: 3,636

Table of contents

Problem Statement
Introduction
1. About the Olympic Games
1.1.
What are the Olympic Games?
1.2.
Why cities are interested in hosting the Olympic Games?
1.3.
Why Tourism is a relevant factor in the Olympic Games?
2. Tourism in London in 2012
3. The overall effect on British economy
3.1. Budget and financing of the Games
3.2. How does the tourism affect the British economy?
3.3. Comparison of Londons GDP from 2011 to 2013. Why did the results emerge in
this trend?
3.4. What is the economic effect of hosting the Olympic Games on U.K?
Findings and conclusions
References

Problem statement

Every 4 years the Olympic Games are celebrated in a different country. To know which
country will host the Olympic Games there is a competition between countries to get the
candidature. One of the main reasons of why countries want to host this competition is because
of the great impact that the city will have. For this reason London presents a candidature in order
to host the Olympic Games of 2012 which payed off and London was able to host the Games in

that year. London is a city that is well known worldwide, being famous even before the
Olympics. In this paper we will analyze the changes on tourism that this country has experienced
as a consequence of hosting the tournament.
We are going to study this problem statement through the following research questions and
sub-questions:
Research questions
1.

How does a major sport event can affect the tourism of the host country?

2.

What is the overall impact on British economy?

Sub-questions
1.

Does the rate of tourism increases during or after the Olympic Games? (We know that
London is well known all over the world, so its popularity increased now?)

2.

Was it worth hosting the Olympics for the city?

This research paper will be developed in the following way. First an introduction of what we
are going to study followed by an explanation of what are the Olympic Games. The second part
is an analysis of how a big sport event affects the tourism in London. The third part is a study of
the Olympic Games impact on the British economy and in the end, a conclusion based on our
findings.

Introduction
This paper consists in a study of the 2012 Olympic Games and the way that they affect the
tourism and the British economy.
The 2012 Olympic Games were celebrated between the 27 of July to the 12 of August of 2012 in
the city of London, United Kingdom.
London won the candidature to host the 2012 Olympic games on the back of three factors
each of which factored in the concept of legacy; a) its status as a global city with one of the
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worlds most culturally and ethnically diverse populations; b) its focus upon regenerating one of
the poorest areas of the city, which is on-going, where the Olympics have a specific role to play
in providing a legacy of amenities for local people; c) a focus upon children as the benefactors of
the Olympics, and the inspiration that could link nations through sport. (Bob Digby, 2011)
Since the moment of the designation of London as the host country for the 2012 Olympic
Games, the economy of the country and their image of the world started to change. The
government provided capital from public funds for the celebration of the event and also the city
adapted their infrastructure for the upcoming events. The Games also have an economic impact
on the expenditures and employment in the host city.
The Olympic Games are one of the events more televised and awaited every 4 years. The
host city will have huge expenses and will be affected in the tourism aspect in many ways, as
research has shown that in the short run the Olympic Games are damage for the tourism but in
the long run there is a positive recovery in this aspect.

1. About the Olympic Games

1.1.

What are the Olympic Games?

The Olympic Games are multidisciplinary sporting events where athletes from all around the
world participate. The Olympic Games are also used to demonstrate to the world that countries
can leave their differences behind even if there are political, economic or cultural conflicts and
compete with effort to try to win the Olympics.
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The Olympic Games were born in Greece and the 5 color rings symbolize the 5 continents of
the world. They are a type A of sports events and their characteristics are: they have an irregular
frequency, they happen every 4 years, it is a major event and it has a significant importance in
the world. (Downward, P. & Dawson, A. & Dejonghe, T., year)
The Olympic Games are organized, promoted and coordinated by the International Olympic
Committee, which is an international non-profit organization that is in charge of administer and
supervise the Games and also choose the city that will host the Olympics. When a city is
designated to host the Olympic Games, it is conditioned to offer the essential sportive
infrastructures and it also have to offer a place to stay for the athletes. Furthermore, a good
telecommunications network and enough space to host all the tourists that will assist the
tournament are also part of the requirements. (Olympic.org, 2016)
1.2. Why cities are interested in hosting?
Cities are interested in hosting the Olympics for the repercussion of the event which had a
greater impact in the media after World Wars. This means that the name of the city and country
will be known worldwide and many new investments will emerge. Furthermore, there will be
construction of new infrastructures in order to host the different disciplines. Also the important
matter is the economic impact that the country will experience, because, for example, since the
moment that the country is selected to host the Olympics, there is already a visible effect in the
behavior of the stock index of the participating countries during the process of selection.
(Christian Dick y Qingwei Wang, 2008)
The games have a big financial cost, but normally if the city behaves well, the investment is
returned and the city and its economy can have gains. Also in the long run the city will become
as a brand and tourists and investors will be attracted to it as it happened with the Barcelona
Olympic Games. (Ceo.uab.es, 2016) The city was not known worldwide and now it is an
important touristic destination.
For these many reasons, countries want to host the Olympics, to develop their economies and
cities.
The economic activities and impacts that affect the city can be divided into three stages:
First stage: pre-Olympic Games - impacts of the constriction stage of the Olympic
project, other pre-Olympic games cost and visitors impact of the project

 Second Stage: during the Olympic Games: impacts related to revenues and costs from
staging the Olympic Games and tourism
Third stage: post-Olympic: includes legacy visitor and infrastructural impacts (Blake,
2005)
We can observe in the following figure that there are more positive than negative legacy in the
city:

Fig. 1 Positive and negative legacy in literature regarding

the impact of the Olympic Games on the hosting country

Even though there are many effects of the Olympic Games to be discussed, in this paper, we
will focus only on tourism and the impact of the Olympics regarding touristic activities and
spending.

1.3. Why Tourism is a relevant factor in the Olympic Games?

In the tourism aspect, the city is beneficiated with a big flow of tourist persons that came to
see the games. There are different groups of tourists that will affect the economy as we can see
in the following figure.

Fig.2 Relevant groups when considering visitor expenditure during megaevents (Source: Preuss 2004a: 52)

As we can see in Fig. 2, only extentioners, event visitors and home stayers create true
positive net changes in economic activity according to the economic impact analysis whereas
runaways and cancellers reduce net economic activity by causing opportunity cost. The rest of
the categories are only important if they change their consumption during the event. (Preuss,
2005)

2. Tourism in London in 2012

London is the third most visited city in the world, well ahead of its main rivals such as New
York, Paris, Amsterdam, Barcelona and Rome, attracting around 30 million visitors from other
countries each and every year. People travel here from every corner of the globe to admire
London's many impressive monuments, explore the richly vibrant culture of the city and perhaps
take in a theatrical performance in the West End.
In addition, a total of roughly 26 million overnight visits are made to London each year, and
these overnight visits are mostly made by people living in other parts of the United Kingdom.
Revenues generated by tourism in London comprise approximately 10 per cent of the city's gross
value added income, and it is projected that tourists in London spend approximately 15 million
per

year.

This

figure

includes

all

aspects

of

the

tourism

industry,

such

as

accommodation, transportation, eating out and attraction entrance fees. Around 13 per cent of the
people who work in London are employed by the tourism sector in one way or another. This
figure is predicted to rise dramatically as London's tourism sector has been working hard to raise
the city's profile as an important and exciting tourist destination. (Uncsbrp.org, 2016)
In 2012, London welcomed 27.6 million staying overseas and domestic visitors, generating
almost 12.9 billion pounds in expenditure. This equated to 15.5 million overseas visitors in 2012
spending a total of 10.1 billion pounds over 94.3 million nights. Furthermore, London`s tourism
economy is estimated at 15.9 billion pounds, supporting 304.000 jobs. (London & Partners,
2013)

Fig. 3 London overnight visits, nights and expenditure

2008-2013 (Source: London & Partners, 2013)

Visitor numbers increased year on year to 15.46 million visitors which is a healthy rise of
1.1% in comparison to 2011. The rise of around 150,000 more visitors over the twelve months is
the equivalent of filling two Wembley stadiums. 2012 also saw London expenditure rise to
10.08 billion which is an increase of 7.0%.This very robust boost in tourism receipts for 2012,
almost two-thirds of a billion pound increase, can be linked to the strong Q3 period which
includes the popular summer holiday period, but also the Olympic and Paralympic Games.
Figures indicate that international visitors took advantage of the spectacle and atmosphere of the
Games. (Londonandpartners.com, 2013)
Furthermore, as observed in Fig. 3 from above, a more substantial increase continued in 2013
in tourist visits and expenditures which indicate no evidence of any sustained post-Olympics
Hangover that other host-cities have experienced in the past.
Between July and September 685,000 overseas residents completed a visit to the UK, either
primarily for an Olympics/Paralympics-related purpose (watching, working or participating),
(470,000 visits), or primarily for another purpose but they went to a ticketed London 2012 event
(215,000 visits). Those people who visited the UK primarily for an Olympics/Paralympics-based
purpose spent an average of 1,510 on their visit, double the spending of people who visited for
other purposes. This higher spend was not driven by length of stay: these people stayed an
average of 8 nights in the UK compared with an average of 9 nights among all visitors.
(Ons.gov.uk, 2016)
Regarding overseas visits:
11,000 of the 685,000 visits were made by people living in Europe, while 127,000 were
from North America and 145,000 from other countries.
The country providing most visits was the USA, followed by France, Germany and the
Netherlands. Outside of Europe and North America, residents of Australia made 32,000
Olympics-based visits and residents of Brazil, which will host the 2016 Olympic
Games, made 13,000 visits. (Ons.gov.uk, 2016)

Fig. 4 -Source countries of the Olympics 2012 (Source:

www.ons.gov.uk)

3. The overall effect on British economy

3.1. Budget and financing of the Games
The initial budget that the government estimated was 2.4 pounds when London won the bid
in 2005, but before the games started, the government increased the budget to 9.3. This means an
increase of 6.9 pounds over the initial budget. (Mail Online, 2016)
There is some specific unforeseen cost which wasnt anticipated by the government and is
regarded as extra cost. In total, the expenditure is 528 million (Telegraph.co.uk, 2011).
1. Venue security 271 million - This security includes military, volunteers and training
scheme.
2. Opening and closing ceremony 41 million
3. Unspecified money - To enhance lighting at velodrome for TV
4. Establishment of scenery for Olympic Park 18 million
5. Steelwork to finish the Aquatics Centre 5 million
6. The bridges and the roads in Olympic Park 5 million
7 Bonus to delivery CLM partner 37 million - CLM is Cornerstone Strategic Value Fund
Inc.
8. Operational cost: utilities, facilities and transportation 33 million
It is significant to see that this increasing budget made the basic funds have a dramatic
change. However, about 80 million cost has been shown to alleviate the pressure of the
government.
1. The cost of cooling systems for the media center 8 million
2. Tax on the sale of the athletes village 30 million
3. Cost of some construction at Olympic Park 42 million
3.2.

How does tourism affect the British economy?

It is forecasted that tourism industry will contribute $363.45 billion to United Kingdom by
2025, following by the fastest growing trend of tourism employment from 2010. How does this

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phenomenon happen? How will it affect British economy? Overall, UK economy has been rising
since 20 century. According to Deloitte Tourism theory, it is predicted that UK GDP will
th

increase approximately 10% which is not that high but significantly provides 3.7 million jobs.
Out of this figure, there are 630,000 works for tourism industry. These employment opportunities
are created from a considerable demand: domestic, international and inbound tourism way.
Respectively, 3% of domestic demand grows and 1.5% of international one increases. The main
contribution is generated from overseas visitors out of inbound tourism which not only grows by
over 6% a year but becomes the fastest growing sector in this industry. (Thornley, 2012)

3.3. Comparison of Londons GDP from 2011 to 2013. Why did

the results emerge in this trend?
London GDP 2011-2013
Year

(millions of US dollars)

2011

$430,287.31

2012

$490,913.11

2013

$487,915.61

Table 1 London GDP 2011-2013 (Source: World Bank Group)

(Millions of US dollars)

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From 2011

Fig. 5 Graphic representation of Table 1 GDP

2011-2013

to 2012,

it is clear to

see

that

London GDP

increases

in 15% and

provides

one third of

work

opportunity more. The significant change can be identified as below (World Bank Group, 20112012).
Researched by WTTC (World Travel and Tourism Council), by 2012, UK tourism industry
increases by 1.3% and even contributed $50.4 billion to the British economy. Owning 200,000
enterprises, 70,000 establishments, including major world-class hotels, country house hotels,
guest houses and holiday parks, plus 110,000 restaurants, bars and pubs, undoubtedly, United
Kingdom has been ranked as the 5th largest tourism industry in the world. (Anon, 2016)
The outstanding performance can be traced back to some specific reasons. First of all, United
Kingdom hopes to play host to the Queens Diamond Jubilee and London Olympics in 2012 as
long as the country continues improving tourism rate which is its original advantage. To achieve
this goal, the Royal Family funds almost $708.51 million per year to maintain their tourist
destinations and renovates infrastructures. Regarding to the attractions, UK is a country which
consists of vibrant city life, rich, historical building and monuments, especially the capital city,
London, remains the key spots, such as the British Museum, the most popular site where 5.8
million people visited in 2010. (Tandfonline.com,2016; Ons.gov.uk, 2016)
Besides the power of the government, Britains welcome is the key point to motivate
overseas tourists to reach here. Once visitors dont feel comfortable in a foreign country, he or
she usually tends to stay shorter or even avoid traveling there next time. Due to enthusiasm and
friendly attitude of the UK residents, the rate of welcome by natives soars more than half times
from 2009 to 2014. This makes the developed country become the 11th place out of fifty
destinations for welcome worldwide by 2015.
As London Olympics began, 29.627 million people visited Britain. In average, one person
spent $798.45 and stayed for 7 days. Only depending on this, UK can gain a large amount of
revenue from the tourists expenditures, as well as investment of foreign enterprises. As 70% of
inbound travelers are willing to reach the UK by air, this indirectly promotes tourism industry

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bound to the third place in Britain export earner ranking, after chemicals and financial service.
(Agencies, T. 2012)
Although 2013 GDP figure diminishes roughly $3,000 million, due to the end of the major
tournament, Britain still maintain their image by continuously improving their main industry,
including tourism, to stabilize economy situation and be more competitive in the future.
3.4.

What is the economic effect of hosting Olympic Games on

U.K?

As London was authorized to host Olympics, multiple economic benefits were revealed
which makes many countries strive for the right to take charge of the worldwide tournament.
Due to 2012 Olympic event, the UK GDP in that year of July had a significant increase,
announced by the Royal family. The success of its economy resulted from the long-run scheme
for four years. To strategize this one-year activity, the government provides a large of funds for
establishment, such as Wembley Stadium, where FIFA World Cup took place, and Hyde Park
was the site for swimming game and marathon, but now, its purpose turns into political assembly.
Only by implementing the building projects, it has given $7.9 billion boost in British
construction industry which was also benefitted the most as United Kingdom was the host
country for Olympics. (Kenyon, J. and Palmer, C. 2008)
According to Oxford Economics study, By 2017, as factoring in pre-Games construction
and other earlier tournament-related activities, it is forecast that UK GBP will generate 16.5
billion dollars. This means the advantageous term will continue still after this big event.
With 60-year global recession, Olympic Games have created thousands of tournament-related
jobs in British nation by 2012. 46,000 people worked on the Olympic Park and Village, 10% out
of whom were previously out of work. However, one major unemployment training association
guided them to the right direction. One is to develop their professional skills and the other is to
urge ones own future prospect to be viewed differently. Besides the rate of unemployment in
early 2012 decreases for 1.2%, most of experts are predicting that, from 2012 to 2015, there will
be approximately 18,000 additional jobs created per year, with 70,000 workers who used to be
unemployed have already helped the capital city produce legacy in labor market. (Dick and
Wang, n.d.)

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At last, foreign investment has its place for hoisting UK economy. East London, from
Croydon to one of British three docks, Royal Albert Dock, has displayed outstanding
transformation by the contracts with the overseas nations, which not only produced tens of
thousands of work but made the UK sprint ahead in global commerce., acclaimed by Boris
Johnson, the Mayor of London.
In general, for the following countries aiming at hosting Olympics in the future and become
outstanding worldwide as United Kingdom did, four key points must be abided by: The victory,
strategy, delivery and legacy. All these qualities are the elements of holding a successful
tournament which is the best chance to perform everything from our young generation. (Nishio,
T., Lim, C. and Downward, P. 2009)

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Findings and conclusions

The major implications of hosting the 2012 Olympic Games for London involve the creation
of new infrastructures that will affect the environment of the city and which will be used after
the games for the city`s further necessity. In addition, London was present in the social media
and telecommunication networks, positively affecting the city`s image worldwide. The Games
can attract new investors but also influences the view of the city regarding tourism matters.
Regarding the statistical data, from what was shown above, we can conclude that even if the
Olympics can have some negative effects on the hosting country, in terms of expenditures and
different businesses, the numbers show that both 2012, which is the year of the Olympics and
2013, one year after, have a major increase that goes up to 7% compared to previous years, in the
tourism area. This shows that Britain`s tourism industry is booming due to hosting a major sport
event and that of course, despite the fact that it implies great work and preparation, this activity
has its benefits.
In general, the effect of hosting Olympics is in a positive term. For political authority, the
Royal Family was willing to provide a large amount of funds to establish all the utilities
associated with the tournament, although there were many upcoming expenditures which was
unpredicted but still cannot be neglected, the government strived to undertaken to maximize the
final profit. In terms of the British economy, tourists contribution took the major place in this
related area. As the figure we have shown above, in an overall way, the spectators indeed boosted
the UK economy resulting from the payment of tickets. Regarding to the overseas visitors, they
really activate the tourism industry in United Kingdom.
Indirectly, to attract more foreigners in the future, whenever the British will hold any
competition next time, this developed nation has started to put lots of efforts on developing their
cities, to upload the sightseeing and the colorful city life, which makes it continue growing
anytime.

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